Cotton Board Rules and Regulations: Adjusting Supplemental Assessment on Imports (2024 Amendments)

SUPPLEMENTARY INFORMATION:

A. Background

Amendments to the Cotton Research and Promotion Act (7 U.S.C. 2101-2118) (Act) were enacted by Congress under Subtitle G of Title XIX of the Food, Agriculture, Conservation, and Trade Act of 1990 (Pub. L. 101-624, 104 Stat. 3909, November 28, 1990). These amendments contained two provisions that authorized changes in the funding procedures for the Cotton Research and Promotion Program. These provisions provided for: (1) the assessment of imported cotton and cotton products; and (2) termination of refunds to cotton producers. (Prior to the 1990 amendments to the Act, producers could request assessment refunds.)

As amended, the Cotton Research and Promotion Order (7 CFR part 1205) (Order) was approved by producers and importers voting in a referendum held July 17-26, 1991, and the amended Order was published in the Federal Register on December 10, 1991 (56 FR 64470). A proposed rule implementing the amended Order was published in the Federal Register on December 17, 1991 (56 FR 65450). Implementing rules were published on July 1 and 2, 1992 (57 FR 29181) and (57 FR 29431), respectively.

This direct final rule amends the value assigned to imported cotton in the Cotton Board Rules and Regulations (7 CFR 1205.510(b)(2)) that is used to determine the Cotton Research and Promotion assessment on imported cotton and cotton products. The total value of assessment levied on cotton imports is the sum of two parts. The first part of the assessment is based on the weight of cotton imported—levied at a rate of $1 per bale of cotton, which is equivalent to 500 pounds, or $1 per 226.8 kilograms of cotton. The second part of the import assessment (referred to as the supplemental assessment) is based on the value of imported cotton lint or the cotton contained in imported cotton products—levied at a rate of five-tenths of one percent of the value of domestically produced cotton.

Section 1205.510(b)(2) of the Cotton Board Rules and Regulations provides for assigning the calendar year weighted average price received by U.S. farmers for Upland cotton to represent the value of imported cotton. This is so that the assessment on domestically produced cotton and the assessment on imported cotton and the cotton content of imported products is the same. The source for the average price statistic is Agricultural Prices, a publication of the National Agricultural Statistics Service (NASS) of the Department of Agriculture. Use of the weighted average price figure in the calculation of supplemental assessments on imported cotton and the cotton content of imported products will yield an assessment that is the same as assessments paid on domestically produced cotton.

The current value of imported cotton as published in 2023 in the Federal Register (88 FR 55345) for the purpose of calculating assessments on imported cotton is $0.014691 per kilogram. Using the average weighted price received by U.S. farmers for Upland cotton for the calendar year 2023, this direct final rule amends the new value of imported cotton to $0.013247 per kilogram to reflect the price received by U.S. farmers for Upland cotton during 2023.

An example of the complete assessment formula and how the figures are obtained is as follows:

One bale is equal to 500 pounds.

One kilogram (kg) equals 2.2046 pounds.

One pound equals 0.453597 kilograms.

One Dollar per Bale Assessment Converted to Kilograms

A 500-pound bale equals 226.8 kg. (500 × 0.453597).

$1 per bale assessment equals $0.002000 per pound or 0.2000 cents per pound (1/500) or $0.004409 per kg or 0.4409 cents per kg. (1/226.8).

Supplemental Assessment of 5/10 of One Percent of the Value of the Cotton Converted to Kilograms

The 2023 calendar year weighted average price received by producers for Upland cotton is $0.802 per pound or $1.768 per kg. (0.802 × 2.2046).

Five tenths of one percent of the average price equals $0.008838 per kg. (1.768 × 0.005).

Total Assessment

The total assessment per kilogram of raw cotton is obtained by adding the $1 per bale equivalent assessment of $0.004409 per kg and the supplemental assessment $0.008838 per kg, which equals $0.013247 per kg.

The current assessment on imported cotton is $0.014691 per kilogram of imported cotton. The revised assessment in this direct final rule is $0.013247, a decrease of $0.001444 per kilogram. This reflects the decrease in the average weighted price of Upland cotton received by U.S. farmers during the period January through December 2023.

The Import Assessment Table in § 1205.510(b)(3) of the Order indicates the total assessment rate ($ per kilogram) due for each Harmonized Tariff Schedule (HTS) number that is subject to assessment. In this direct final rule, AMS is amending the Import Assessment Table to revise the total assessment rates in light of the change to the supplemental assessment rate. This table must be revised each year to reflect the change to the supplemental assessment rate, and any changes to the HTS numbers and respective conversion factors.

AMS believes that these amendments are necessary to ensure that assessments collected on imported cotton and the cotton content of imported products are the same as those paid on domestically produced cotton. Accordingly, changes reflected in this rule should be adopted and implemented as soon as possible since it is required by regulation.

As described in this Federal Register document, the amendment to the value used to determine the Cotton Research and Promotion Program importer assessment will be updated to reflect the assessment already paid by U.S. farmers. For the reasons mentioned above, AMS finds that publishing a proposed rule and seeking public comment is unnecessary because the change is required annually by regulation in 7 CFR 1205.510.

Also, this direct-final rulemaking furthers the objectives of Executive Order 13563, which requires that the regulatory process “promote predictability and reduce uncertainty” and “identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends.”

AMS has used the direct rule rulemaking process since 2013 and has not received any adverse comments; however, if AMS receives significant adverse comments during the comment period, it will publish, in a timely manner, a document in the Federal Register withdrawing this direct final rule. AMS will then address public comments in a subsequent proposed rule and final rule based on the proposed rule.

B. Rulemaking Analyses

Executive Order 13175

This action has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. The review reveals that this regulation would not have substantial and direct effects on Tribal governments and would not have significant Tribal implications.

Executive Orders 12866, 13563, and 14094

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health, and safety effects; distributive impacts; and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 reaffirms, supplements, and updates Executive Order 12866 and further directs agencies to solicit and consider input from a wide range of affected and interested parties through a variety of means. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review.

Executive Order 12988

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 12 of the Act, any person subject to an order may file with the Secretary of Agriculture (Secretary) a petition stating that the order, any provision of the plan, or any obligation imposed in connection with the order is not in accordance with law and requesting a modification of the order or to be exempted therefrom. Such person is afforded the opportunity for a hearing on the petition. After the hearing, the Secretary would rule on the petition. The Act provides that the District Court of the United States in any district in which the person is an inhabitant, or has his principal place of business, has jurisdiction to review the Secretary's ruling, provided a complaint is filed within 20 days from the date of the entry of the Secretary's ruling.

Regulatory Flexibility Act and Paperwork Reduction Act

In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has examined the economic impact of this rule on small entities. The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such action so that small businesses will not be unduly or disproportionately burdened. The Small Business Administration (SBA) defines, in 13 CFR 121.201, a small cotton farming business as those having annual receipts of no more than $3.25 million (North American Industry Classification System (NAICS) Code 111920) and small “Other Farm Product Raw Material Merchant Wholesalers” (cotton merchants/importers) (NAICS Code 424590) as having no more than 175 employees.

According to the NASS 2022 Agriculture Census, the number of cotton farms is 14,283. NASS also reports that the total U.S. production value for Upland production averages $6,261,378,333 for 2021-2023. Dividing the crop value by the number of cotton farms, the average crop value is approximately $438,380. Since $438,380 is well below $3.25 million and assuming a normal distribution, the majority of cotton farmers are small according to the SBA standards.

The Cotton Board estimates approximately 37,000 importers are subject to the Cotton Research and Promotion Order. According to the United States Census Bureau's “2021 Survey of SUSB Annual Data Tables by Establishment Industry,” most importers are considered small entities as defined by the SBA (13 CFR 121.201). This rule would only affect importers of cotton and cotton-containing products and would decrease the assessments paid by the importers under the Cotton Research and Promotion Order. The current assessment on imported cotton is $0.014691 per kilogram of imported cotton. The amended assessment is $0.013247, which was calculated based on the 12-month weighted average of price received by U.S. cotton farmers in 2023. Section 1205.510 of the Order, “Levy of assessments”, provides “The rate of the supplemental assessment on imported cotton will be the same as that levied on cotton produced within the United States.” In addition, § 1205.510 provides that the 12-month weighted average of prices received by U.S. farmers will be used as the value of imported cotton for the purpose of levying the supplemental assessment on imported cotton. Under the Cotton Research and Promotion Program, assessments are used by the Cotton Board to finance research and promotion programs designed to increase consumer demand for Upland cotton in the United States and international markets. In 2023, producer assessments totaled $41.1 million and importer assessments totaled $40.7 million. According to the Cotton Board, should the volume of cotton products imported into the U.S. remain at the same level in 2024, one could expect a decrease of assessments by approximately $4,000,800.

Imported organic cotton and products may be exempt from assessment if eligible under § 1205.519 of the Order.

There are no Federal rules that duplicate, overlap, or conflict with this rule. In compliance with Office of Management and Budget (OMB) regulations (5 CFR part 1320) which implement the Paperwork Reduction Act (PRA) (44 U.S.C. Chapter 35) the information collection requirements contained in the regulation to be amended have been previously approved by OMB and were assigned control number 0581-0093, National Research, Promotion, and Consumer Information Programs. This rule does not result in a change to the information collection and recordkeeping requirements previously approved.

A 30-day comment period is provided to comment on the changes to the Cotton Board Rules and Regulations herein. This period is deemed appropriate because an amendment is required to adjust the assessments collected on imported cotton and the cotton content of imported products to be the same as those paid on domestically produced cotton.

For the reasons set forth in the preamble, the Agricultural Marketing Service amends 7 CFR part 1205 as follows:

1. The authority citation for part 1205 continues to read as follows:

Authority: 7 U.S.C. 2101-2118; 7 U.S.C 7401.

2. In § 1205.510, paragraph (b)(2) and table 2 to paragraph (b)(3) are revised to read as follows:

(b) * * *

(2) The 12-month average of monthly weighted average prices received by U.S. farmers will be calculated annually. Such weighted average will be used as the value of imported cotton for the purpose of levying the supplemental assessment on imported cotton and will be expressed in kilograms. The value of imported cotton for the purpose of levying this supplemental assessment is $1.3247 cents per kilogram.

(3) * * *